calibrated sovereign default model with elections and two politically heterogeneous policy makers who differ in the marginal …

the presence of sovereign default beliefs a monetary policy, which aims to stabilize inflation through an active interest … result, which relies on endogenous changes in the default premium, is at odds with the results in an environment without … default risk, where an active monetarypolicy guarantees macroeconomic stability. The results are highly relevant for the …

This paper extends the sovereign default model described in Arellano (2008) by including both domestic and foreign … debts. The government issues debt and can either inflate away its domestic debt or default on its external component. Under … foreign debt increases with the quantity of debt issued due to the increasing likelihood of default. This tradeoff between …